Infographic Elevator Pitch

Note: deal promotion is done via API (B2B) and through a sister company registered and compliant with all securities laws. Hint 1: RIAs care about this. Hint 2: Our Credit Risk Model for SME lending will help banks underwrite where they currently can't.

Founder Video - 1 Minute Message

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Market Size

Why Now?

As of August of 2015, there are 21 states that have approved crowdfunding exemptions and 14 are soon to follow. Also, at the federal level, Title IV (aka Reg A+) of the JOBS Act in the USA made it possible for anyone to invest in a privately held business within certain limits. Green means go!!!

In collaboration with Wharton San Francisco and the Wharton FinTech Club (1st of its kind), I've been privileged to organize a "FinTech Executive Speaker Series & Networking Event" later this month which will feature, among other major FinTech players, the likes of Ron Suber (President of Prosper), Al Chang (CTO of Xignite), Ryan Caldbeck (CEO of CircleUp) and Steve McLaughlin (WG '95, CEO of Financial Technology Partners and BlackRock's exclusive advisor in the acquisition of Future Advisor). To no surprise, the event sold out in about a week after we announced it but there will be more coming up. You can add your email address for early bird access to future events by sending a spam-free note to amilcar@fintecha.com. Subject: FinTechMeet. Below are some descriptive statistics that shed light into the FinTech mindshare in the SF Bay Area (this isn't scientific research so please take it with a grain of salt). Caveat #2, no data other than these clusters will be revealed. Enjoy.N: 106 | Persona Types: 5 | Areas of Interest: 7Attendance by Persona Type

Note: Tickets were allotted by type. Distribution excludes speakers. Not a signalOn an absolute basis...

Current Entrepreneurs: What are the top three areas that 30 FinTech entrepreneurs are working on? Robo-Advisors (40% of 30), Lending (27%) and Payments (20%).

Expected Growth: Where are you most likely to see new business pop up in FinTech from Wannapreneurs and Aficionados? Robo-Advisors & Lending at 14 out of 21 responses combined or 67%.

Jobs Creation: Are entrepreneurs in line with students in terms of skill and will? Yes, they either work or chase after the same top areas (i.e. Robo, Lending, Payments)

News Impact: What's the number one topic for 11 FinTech aficionados? Lending

Investment: What about the 10 investors?. What's on their mind? Robo-Advisors (40%), Personal Finance (30%) and Equity Crowdfunding (20%) but I wouldn't rely on this too much given how invitations were made.

Areas of Interest / Expertise [100% Stacked]

On an absolute basis... Who cares about what?At the risk of sounding like a tarot cards reader or fortune cookie (one joke per post max, promise). Do note:

Opportunities: If your mind is thinking or working on Robo-Advisor, Lending or Payments, you have a great chance at finding talent (~1:1 ratio) and partnerships with others in your ecosystem at Wharton and in SF.

PFM is alive: If you are in personal finance, human (6:1) and financial capital (3:1) supply looks healthy

Analysis By Topic

What are top three topics in people's minds irrespective of background or current FinTech involvement?Yep, you guessed them. Robo (38%), Lending (25%) & Payments (14%), which combined with personal finance (11%) on aggregate these four represent 88% of all attendees. Again, this wasn't a proper survey but I found the data to be fascinating and worth sharing.

Disclaimer - I am selfishly writing this post so that Small & Midsize Businesses that we support at FundPaaS, can raise capital from what we call CustVestors or customers turned investors by first educating them on the crowdfunding lingo. I am also trying to protect investors and increase financial literacy; a long term passion of mine since completing Morgan Stanley's Reach For Excellence program in 2007 where I focused on bringing financial services to underbanked groups and a few years later, the same passion continued as I started my first FinTech business in 2011, BuckSprout. One of the earliest Robo-Advisor startups seeking to automate the investment management process for $10 a month. I use to say that we had a 3D vision to Democratize, Demystify andDisrupt the Financial Advisory process. Not sure if it worked but I hear that #FinTech and #Robo-Advisors are the talk of the town nowadays. Perhaps the most expensive lesson I've gotten on timing.Let's start with definitions:1) fundnoun: fund; plural noun: funds1. a sum of money saved or made available for a particular purpose.verb: fund; 3rd person present: funds; past tense: funded; past participle: funded; gerund or present participle: funding

provide with money for a particular purpose."the World Bank refused to fund the project"

2) Crowdfunding: (not new by the way)Yes, is that simple. The crowd, a set of individuals and/or entities, providing money for a particular purpose. Crowdfunding has been around for a long time (1885 has a cool example below) but limited to pooling money without an expectation of financial return (not an investment per se). Until the passing of the JOBS Act in 2012, crowdfunding as an investment using general solicitation means like social media was not possible. Below is a quick summary for how to fundamentally distinguish and parse through crowdfunding portals in the future.

Crowdfunding types Crowdfunding (i.e. not investments)

Donations: the crowd pools funds and donates that money without expecting anything in return other than a great feeling inside and a greater mission to be accomplished. Like curing cancer.

Rewards: the crowd can fund a company to receive a reward in return like being the main character behind a novel or a simple tweet ;-)

Pre-Orders: the crowd can fund an early stage product company to help it commercialize a product that backers want. Effectively buying the product early and usually at a discount. Once built, the product is shipped to you.Usually. Perform as much due diligence as you can to avoid fraud.

Equity & Debt Crowdfunding (i.e. investments for financial gain)

Equity Crowdfunding: through equity crowdfunding, you are taking the financial risk and could very likely lose 100% of the principal invested in an early stage company (e.g. startup operating in a garage). However, the golden rule applies in that high risk carries a probability of a high reward payoff. One of the earliest investors in google, is claimed to have netted 5.1MM shared which is over $3Bn based on today's share price of $600.70. Not your everyday scenario. Not financial advice. Do your homework before you buy equity in an early stage company. Something as silly as a founder dispute can implode a company. To learn more, look up "angel investing".

Note: the payoff on an equity investment IS NOT overnight and it's usually NOT an income generation strategy. You should expect to hold that investment for at least 5 years until a company has an exit (e.g. sells itself and hopefully for a profit) so that all shareholders can share pro-rata. These investments are typically illiquid, which unlike stocks of public companies, privately held stock doesn't usually have liquidity (lots of people buying and selling it)

Crowdvesting: a generic portmanteau that joins Crowd and Investing. A new word used to distinguish investing vs. donating by the crowd. As a rule of thumb, treat it with the same level of risk as a equity & debt crowdfunding.

Debt Crowdfunding: instead of buying equity in an early stage company, you can lend ANY company or ANY person money. So the financial instrument is the only difference. It's more like an I OWE YOU / LOAN between you and a company that carries an interest rate, re-payment frequency and an expiration date at a basic level. In plain english that means, money in your pocket if the company is solvent and paying back its creditors on a regular basis (monthly, quarterly, semi or annually) interest and the full principal of the loan upon the maturity date (i.e. expiration date). The company can also go under and there goes your I OWE YOU.

Note: the payoff on a debt investment IS NOT overnight and it's usually an income generation strategy. Financial return can come from the interest repayments, appreciation of the underlying value of the assets used as collateral for that loan or if issued at a discount (see zero coupon bonds issued by the US Government if you want to nerd it out).

Crowdlending: a type of crowdfunding activity typically characterized by the crowd lending to either a person, as is the case in peer-to-peer lending (P2P) or to a business, which alters the suffix and recipient of funds (i.e. P2B). It's the same thing as Debt Crowdfunding and would typically carry less risk than an equity investment depending on the willingness and ability of the issuer (the borrowing party in the IOU) to repay its debts.

Synonyms: to crowdfund or to crowdfinance any asset is the same darn thing. At least according to my financial training and google definition above. Funding and Financing are synonyms.

History Brief

The first recorded successful instance of crowdfunding online occurred in 1997, when a British rock band funded their reunion tour through online donations from fans. Inspired by this innovative method of financing, ArtistShare became the first dedicated crowdfunding platform in early 2000s. (fundable) One of earliest incidence of crowdfunding can also be seen in one of the world’s most famous landmarks. "The Statue of Liberty was partially funded by the crowd after the American Committee of the Statue of Liberty, who were tasked with raising the money for the statue, fell short by more than a third and the New York Governor Grover Cleveland rejected the use of city funds to pay for it. That was 128 years ago in the summer of 1885" source

The statue’s savior came in the form of renowned publisher Joseph Pulitzer who decided to launch a fundraising campaign in his newspaper The New York World. For the curious and history buffs (ehm fellow nerds, go here)

Equity | Debt Crowdfunding Timeline

It's just becoming apparent to folks entering the industry from traditional financial services backgrounds, that educating even the most sophisticated investors is still necessary as many of them tend to confuse crowdfunding as only something related to donations or rewards given that the earliest pioneering platforms, Kickstarter (est. 2009) and Indiegogo (est. 2008) are NOT investment platforms. They are portals where anyone willing to support any cause, small business or otherwise, can pool funds together to get a product, t-shirt, public mention, perks, etc in return but not a check in the mail.

Dear Entrepreneur,As you'll see below, the American government and most of the states absolutely love you for taking great risks and defeating all odds while holding yourself responsible for 64% of all new net jobs and representative of 99.7% of all US employers. As of June of this year and since 2012 when Title II of the JOBS Act was enacted, the US government has given you an opportunity to get your dreams funded and focus on what you do best -- execution. If you have eyeballs/downloads/customers, irrespective of revenues, and a strong relationship with your customer base, you should be able to get funded right on your website leveraging Reg A+ at the federal level, Intrastate CrowdFunding Exemptions (live in 21 states and 7 will soon follow), 506 c (Title II of the JOBS Act) or 506b ('80s child Reg D which prevented general solicitation and limited the number of non-accredited to 35 with an unlimited number of accredited) [see JOBS Act + Reg A primer below]. FundPaaS is willing to take a gamble with you and align incentives to only get paid if you get funded. Growth hackers welcome. Good luck!Please note this video is a minimal viable solution and an experiment before it goes to production. It should be taken lightly and as a DRAFT. Also, consult with your legal counsel as what I write is strictly my opinion based on research and not legal or financial advise. I am simply a FinTech nerd sharing his research.

Sample companies that utilized crowdfunding

Yet most of the brands above, raised capital via a 3rd party site except for Sony & Dick's Sporting Goods. Here's what we foresee as the outcomes and opportunities given the regulatory changes:

One potential way to also increase brand loyalty is by increasing a customer's switching costs thereby making it easier to continue buying the same brand rather than competing brands. The catalyst we need is a new type of investor that supports the brands s/he loves. A custvestor (noun) is a customer of a privately-held business that provides a product or service that s/he consumes AND an investor in the same business. In addition to being a cost-efficient, faster and friendlier source of capital for Small & Medium Sized Businesses (SMBs), private companies will also benefit from additional resources provided by the same vested consumer.

In addition to capital, these could include the following examples:

1) Customers turned promoters: startups using t-shirts and laptop stickers as cheap and effective marketing. Similarly off-line promotion via word of mouth and online social media channels are obvious ways that consumers will help the same brands where they donated or invested their money.2) Customers turned mentors: I am guilty of this. As I've helped tea houses owned by Sherpas on the Mt. Everest Basecamp trail, set up their own Trip Advisor pages or food places that I frequent with tip or two on accounting, marketing and technology matters. I believe that if good rapport exists between a small business owner and customer, mentorship can naturally take place. Most of the most successful VCs are also gret mentors. Beware, of course, of nasty investors who'd want to get into every detail of your business. For that reason, the 'crowd tranche', the portion of a business capitalization table typically reserved for the crowd, is usually a single line item with a general partner representing the interests from those investors.3) Customers turned networking hubs: customers that are invested in the brands they love can facilitate intros to vendors, industry experts and other investors since there's mutual benefit (more so if financial gain is attached of course). New Rules, New Game - Equity Crowdfunding in the United States over timeAs of the summer of 2015, there are 17 states that have approved crowdfunding exemptions and 21 that will soon follow. These rules make it possible for a regular customer to also invest in a privately-held business. Also, at the federal level, Title IV (aka Reg A+) of the JOBS Act in the USA made it possible for anyone to invest in a privately held business within certain limits (usually 10% of your income if you are not accredited).A "CustVestor" - a new type of investorIn the near future, there will be better ways to raise capital, build brand loyalty. For established businesses with high transactional volume or web traffic that are looking to expand, however, converting their own customers into investors is probably a good place to start since trust already exists and incentives can be aligned as there are no disconnects between random accredited investors, consumers and investors in a private label. They are all the same when an customer is turned into an investor.

A custvestor(noun) is a customer of a privately-held business that provides a product or service that s/he consumes AND an investor in the same business. In addition to being a cost-efficient, faster and friendlier source of capital for Small & Medium Sized Businesses (SMBs), custvestors also provide the highest level of brand loyalty since their "switching costs" increase as a result of investing and consuming in the same product or service. Also, investors that provide both cash and business support can be more valuable than funds alone.

Origin of the wordCustvestors were born as a result of the legalization of equity crowdfunding in the United States. As of the summer of 2015, there were 17 states that had approved crowdfunding exemptions and 21 that were soon to follow. Also, at the federal level, Title IV (aka Reg A+) of the JOBS Act in the USA made it possible for anyone to invest in a privately held business within certain limits.

Source: NASAARelated WordsCustVesting - the act performed by custvestors when supporting the brands that they love and investing in what they know. CustVesting typically involves providing an asset owned by the custvestor which can be, but not limited to:

an investment of money like buying an equity stake (e.g. Stock) in a business or lending capital (e.g. Loan) to a growing business in exchange for financial return.

an investment of time like working alongside an entrepreneur as a consultant or mentor who in turn, provides a product or service that you purchase on a regular basis.

an investment of social influence (e.g. endorsement or introduction) like tweeting about a business or brand that one loves which in turn leads to additional customers, revenues or both.

Small & Medium Businesses in the US

Is Crowdfunding legal at a federal level?Yes, with the passing of Title II of the JOBS Act in 2013, general solicitation of privately held securities is possible as long as the necessary steps are taken to verify that someone is accredited based on income, assets or 3rd party letter. Via our Investor Onboarding API, this verification process is automated, cost-efficient, secure and scalable.Below is a quick primer of the JOBS Act

In which states is CrowdFunding Legal?This is best described by the picture below. By the numbers there are 17 states with crowdfunding exemptions that are already live and 21 more in the making. These rules, unlike Title II / Title IV (Reg A+) of the JOBS Act allow for general solicitation of privately held securities PLUS anyone can invest within certain limits of course.

New York, NY, July 15, 2015 –(PR.com)– FundPaaS – the easiest way to raise capital onlineStarted by a team of FinTech and Legal experts in the heart of Silicon Valley, FundPaaS, a portmanteau of “funding” and “platform as a service (PaaS),” is set on a mission is to simplify raising capital online and enable the 28MM SMBs in the US, to get loans directly from their customers and create stickier relationships with those they serve and love them best.Like most startups, FundPaaS had to prioritize its roadmap and build that first set of features dubbed as the minimum viable product (MVP) in order to fund its greater vision while addressing inefficiencies in today’s offerings for ID verification, AML and Accreditation Services. These services are expensive, fragmented, convoluted and full of conflict with portal operators as they redirect investors to 3rd party sites. FundPaaS provides ultimate flexibility in terms of user experience since investors are never forced to leave the crowdfunding site. There are no 3rd party forms to fill out but most importantly, FundPaaS doesn’t store or sell any investor data which makes it 100% conflict free.Members of the FundPaaS team, have worked on Wall St (Goldman Sachs, BlackRock) and Silicon Valley (Motif Investing, Planwise, BancBox, NASA) and have been intricately involved in the launch of over 150 crowdfunding portals since the passing of Title II of the JOBS Act in 2013. That’s enabled the company to build strong partnerships with the best vendors servicing the crowdfunding industry as well as key customers that can benefit from a reduction in friction during the investor sign-up process, cost savings and regulatory compliance. FundPaaS’ API only costs $12 per investor vs. $60 per investor charged by most of its competitors. “By being a system integrator of choice, we seek to reduce our client’s time to market as their one-stop shop to connect with the most frequently used APIs in crowdfunding. In a way, we are borrowing this approach from our friends at Uber. For payments they used Stripe instead of building their own so we’re currently integrating the 3rd party escrow services provided by FundAmerica and CrowdPay to power equity crowdfunding instead of reinventing the wheel. On the Investor Onboarding API, we apply the same concepts but with several data sources. We access and analyze public records including the IRS, credit bureaus, over 18,000 financial institutions, payroll services and 1,500 aggregated ‘do not transact’ lists such as the OFAC database, politically-exposed people (PEPs) and negative watchlists to name a few. This provides compliance with the US Patriot Act (OFAC, FinCEN), Bank Secrecy Act (CIP) and SEC Rules to ensure that an investor is in fact, accredited based on income, assets or 3rd party letter. We also use Big Data analytics to generate a compliance score that indicates the level of risk associated with a particular investor or issuer. The score necessary to ‘PASS,’ can be calibrated by a compliance officer or portal administrator,” said Amilcar Chavarria, a FinTech Entrepreneur on his 3rd tech startup and FundPaaS’ Co-Founder & CEO.Gold Rush? Sell Picks & ShovelsIf successful, FundPaaS will enable SMBs to tap a new source of “working capital” that wasn’t possible until the recent approval of Reg A+ (Title IV of the JOBS Act) last month which enables companies to raise up to $50MM from accredited and non-accredited investors. In addition to this regulatory change at the federal level, intrastate crowdfunding exemptions are active now in 17 states with an additional 21 states pending approvals. Whether at the federal or state level, these new rules have made investing in small and medium size businesses accessible to everyone within certain limits. The passing of these new rules have generated a ‘gold rush’ sort of frenzy with lots of crowdfunding portals launching every day as well as traditional business models like commercial real estate (e.g. CrowdStreet), private equity (e.g. The Carlton Group) and cleantech firms (e.g. SolarCity) adopting a new web 2.0 standard in the world of online investing. FundPaaS’ mantra is to sell the picks and shovels, which makes the Investor Onboarding API, its first axe in the marketplace.As an API 1st shop, FundPaaS has built a cost-efficient and scalable solution that its clients can use while remaining in control of their user experience. No technical team on your side? That’s not a problem. They’ve also wrapped the same API into an easy to use web application that anyone can access and have partnerships with the best portal builders such as CrowdEngine.